Having a baby is one of the most exciting times in a parent's life, but it's certainly not without its financial challenges. There are many things to consider when preparing for a new arrival, such as child care costs, maternity leave, and estate planning measures, such as appointing a Guardian. In this guide, we're breaking down the most crucial steps to financially prepare for a new family member. Whether you are expecting your first child or adding a new member to your family, estate and financial planning are critical to ensure that your new loved one is well taken care of, even in those worst case scenarios.
Financial Planning Tips
If you're expecting a new addition to your family soon, here's a list of general financial planning items to consider:
Insurance: Make sure you have adequate insurance coverage. This includes health and life insurance. For life insurance, you'll want to look into beneficiary designations and make sure that your coverage is up to date. For health insurance, you’ll need to add your new addition to your policy and review it carefully.
Baby Registry: With all the excitement, your loved ones will likely be looking for ways to help you in the coming months and years. One way to manage their generosity is to set up a baby registry online. You can register for whatever you need– from diapers to furniture, and everything in between.
Create a Budget: Sticking to a budget can feel similar to going on a diet. It's not easy, but it pays off! Consider setting up a separate Baby account to help you save, making a spreadsheet (you can find or purchase a template online to make it easier), or using an online money management tool or app.
529 Plan: Even though kindergarten might seem far away, it’s never too soon to invest in your child's future and start saving for college. A tax advantaged 529 plan has been a proven winner for many to ensure a good education for your kiddo.
Appoint a Guardian
Guardianship is the legal process of establishing who will step in should you become unable to care for your children. In the case of a minor child, an appointed Guardian takes care of the child's needs and helps manage their financial decisions. There are many factors to consider when appointing a guardian. You'll want to choose someone who shares your values, who you trust implicitly, and who is physically and emotionally capable of caring for your children should the need arise. It's also important to have a backup plan in place, in case your first choice is unable or unwilling to fulfill their duties.
Failing to appoint a guardian could result in your children being placed in the care of someone you didn't choose, or worse– the state. That's why perhaps the biggest benefit to going through the process of naming a guardian is peace of mind. Knowing that you’ve provided for those you love most in this world to be cared for, when you can no longer do it, is a gift you can give yourself that’s like no other. So, while it may not be the most pleasant thing to think about, estate planning for a new family member is crucial to ensure that they are always taken care of, no matter what happens.
Create or Update Your Estate Plan
If you don't have an estate plan, now is the perfect time to create one. If you already have a plan in place, it's important to review and update it regularly– especially after major life events, such as having a baby. There are a few key estate planning documents you'll want to create or update, including:
Last Will and Testament: the starting point for anyone planning their Estate Plan. This legal document is the very foundation of estate planning, as it states how you want your assets to be distributed if you were to pass away. You can use this to appoint a legal Guardian and beneficiary designations.
Advance Healthcare Directive: this includes Health Care Proxy and your Living Will. Health Care Proxy allows you to name a Proxy who is authorized to make medical decisions for you if you can’t make them for yourself. Through your Living Will, you can address common medical scenarios and make your wishes known.
Durable Power of Attorney: used to designate an agent who is authorized to act on your behalf. They are similar to your Health Care Proxy, but are typically in charge of making financial, personal, and business-related decisions on your behalf.
While the list above includes the essential documents, there are other estate planning documents that may be beneficial for you and your family, depending on your unique circumstances, such as a Trust. While there are many different types of Trusts, generally speaking, a Trust will allow you to have more control over your estate and help your family avoid the dreaded probate process. No matter which documents you choose to include in your Estate Plan, the most important thing is that you have some sort of plan in place. By taking the time to review or create your estate plan, you can ensure a brighter future for your child and solidify your legacy.
Planning Ahead is Essential
As you can see, there are many things to consider when preparing for a new baby. While bringing a new life into the world can be an exciting experience, it also comes with a lot of financial challenges. From insurance to budgeting, there are many things to consider when you have a new addition to your family. However, by following these simple tips, you can be sure that you are financially prepared for your new arrival. Make sure you have all the essentials—diapers, clothes, car seats—but don’t forget about estate planning either. It's only one part of the equation, but it's an important one.
Creating or updating your Will and nominating guardians are important steps in ensuring your child is taken care of if something happens to you. So take a deep breath, put together a checklist of your own, and don't be afraid to turn to the experts for help. At Trust & Will, we’re here to help you keep things simple. You can create a fully customizable, state-specific Estate Plan from the comfort of your own home in just 20 minutes. Take our free quiz to see where you should get started, or compare our different estate planning options. Get started today!
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